SACRAMENTO -- Gov. Jerry Brown won widespread praise Thursday for proposing a budget that beefs up education spending, averts more cuts to the social safety net and sets California on a fiscally stable course that until recently seemed like an impossible dream.

Two years ago, in the midst of a stubbornly rotten economy and in the first year of his term, Brown was grappling with a projected $26.6 billion deficit over an 18-month period. A year later, it was $16 billion. And even until Thursday morning, the Legislative Analyst's Office was forecasting a $1.9 billion budget hole.

But suddenly, Brown could crow about a balanced budget with projected future surpluses, thanks largely to previous grueling program cuts and voters who in November approved his $5.6 billion annual tax-hike measure, Proposition 30.

"This is new; this is a breakthrough," Brown said at a news conference in which he unveiled his spending plan. "But it doesn't mean we're in the clear."

As part of his $97.7 billion budget for the next fiscal year, which begins in July, Brown continued to take the path of paying down past debts over restoring previous cuts, as many of his Democratic allies are demanding. Brown calls for paying $4.2 billion down on the "wall of debt" built by previous governors -- "paying for the expenses of the past instead of meeting current needs" -- and establishing a $1 billion rainy-day fund.

That green-eye-shade approach has instilled many in the Capitol with confidence, including leaders of the normally critical GOP opposition. Indeed, the apparent shift in tides has many talking about a revived Golden State.

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"Just a few months ago, we were talking about dramatic cuts to education, ending school early," said Thad Kousser, a political science professor at UC San Diego. "But voters voted themselves a balanced budget and, barring a double-dip recession, the governor now gets to use the budget as a tool to reshape government and state policies rather than 'how to stop the bleeding.'"

Though the Legislative Analyst's Office projected a $1.9 billion deficit through 2013, Brown's budget is balanced by counting $600 million from new revenues from Proposition 39 (a measure passed in November that closed corporate loopholes), $560 million from the closure of redevelopment agencies and slightly higher revenues from other tax programs.

One major aspect of his budget is a policy initiative aimed at overhauling the K-12 school financing system. Brown is calling on legislators to scrap an antiquated formula that has created wide disparities in revenue among similar school districts -- and replace it with a formula awarding more to schools serving low-income students and those struggling to learn English. Brown also would give districts more latitude in spending decisions.

K-12 schools would get $1.89 billion more than last year -- a 4 percent increase over last year. In addition, the state would pay back $1.8 billion that it owes schools from previous years.

But Brown's biggest thrust in his budget rollout was to play the role of fiscal scold. The Democratic governor repeatedly warned legislators in his own party to cool it on their spending demands.

"Fiscal discipline is not the enemy of democratic governance but rather its fundamental predicate," he said. "It's very hard to say no. That's basically going to be my job."

A balanced budget, he said, "allows us to take care of people over time instead of a momentary rash of excitement -- and then we pay with a hangover."

The governor will be in a strong position to say no, said David Latterman, a political science professor at the University of San Francisco.

"Brown can pretty much pick and choose whatever he wants to do -- he's got all the political capital he needs from the voters," Latterman said. "He'll check some of the more shocking ideas that might come from the left, and voters expect him to do that."

Republicans, who have fallen so low in their numbers at the Capitol that they won't likely have much impact on policy decisions in coming years, approved of Brown's fiscal message.

"Assembly Republicans agree with the governor that a 'live within our means' budget is the most fiscally responsible course for our state this year," said Assembly GOP Leader Connie Conway, R-Visalia. "Now is not the time to enact massive spending increases that will reverse the progress we've made in reducing the deficit."

Business groups gave Brown credit for, as Jim Wunderman, president and CEO of the Bay Area Council said, "restoring a measure of fiscal stability to California's budget."

Brown's plan to continue to pay down debt and build a $1 billion reserve were good first steps, said John Kabateck, executive director of California's National Federation of Independent Businesses. But businesses remain skeptical that all the Proposition 30 money will go to schools.

Though they generally embraced Brown's budget, allies from the left urged the governor to keep in mind that many people are still hurting from previous cuts in state support.

Brown's budget "lacks a vision for the future about how we will help the millions of Californians who are unemployed or living in poverty despite working," said Vanessa Aramayo, director of California Partnership, a coalition of community organizations that helped turn out the vote of low-propensity voters for Proposition 30.

Art Pulaski, secretary-treasurer of the California Labor Federation, called on the governor to "repair the gaping holes in our safety net" by eliminating or reforming corporate tax breaks that are not creating jobs.

Brown is proposing restoring some social service cuts. His $19.5 billion budget for the Department of Social Services is an increase of $577.4 million from last year's budget.

Senate President Pro Tem Darrell Steinberg, D-Sacramento, vowed to use the Democrats' newly gained two-thirds majority to eliminate certain corporate tax breaks. He also said he wants to restore programs that have been eliminated or diminished by past cuts, such as child care and adult dental care.

Whichever path the Legislature takes before they counter with their own budget in the spring, Brown has proven himself to be a leader with the right touch, said Max Neiman, senior resident scholar at the Institute of Governmental Studies at UC Berkeley.

"I've always been struck by how prudent and careful he's been, particularly in the last couple decades," Neiman said. "But we're real fortunate to have him in these times. He's the governor for these times."

Staff writers Josh Richman and Sharon Noguchi contributed to this report. Contact Steven Harmon at 916-441-2101. Follow him at Twitter.com/ssharmon. Read the Political Blotter at IBAbuzz.com/politics.